12 GRC Professional • Summer 2013
LESSONS
LEARNED
IT'S THIS HISTORY THAT JUSTICE
Richard Tracey took into account when deciding
the size of the penalty --- the highest ever fine
for these kinds of breaches in Australian retailing
--- and consequent remedies in the Federal Court
in Victoria before Christmas. The Australian
Competition and Consumer Commission
(ACCC) brought the action for breaches in 2010
of the Trade Practices Act 1974.
Justice Tracey, could have charged the
company a maximum $10 million but decided
$1 million ($400,000 for selling more than 1000
nightdresses that breached Australian fire safety
standards, $400,000 for selling more than 1000
unsafe pairs of girls' pyjamas between September
a nd December 2010, and $200,000 for false and
misleading labels on both sets of clothing items
which claimed they were "low fire danger")
was a big enough deterrent when combined
with a mandatory, stringent and comprehensive
compliance and risk management regime
requiring proof of undertaking to the ACCC at
regular intervals, with repercussions if it failed
to do so.
In summing up the repeated safety failures by
the company (a subsidiar y of Cotton on Clothing
Pty Ltd) Justice Tracey considered the fact that
Cotton On had co-operated with the ACCC
in voluntarily issuing recall notices about the
flammable nightwear.
He also noted that both the ACCC and Cotton
On were in agreement that the contraventions
were the product of inadequate compliance
procedures and poor super vision rather than any
deliberate attempt to supply children's nightwear
in breach of the Act.
"Responsibility for ensuring compliance with
relevant safety standards and the Act rested on
senior managers of the respondents," he said in
his judgment.
Uncommunicative
As has been the case with previous compliance
and safety failures, Cotton On has said little
when pulled up over breaches. Other than
advertising product recalls, making unsourced
and carefully worded short statements and, in
the latest instance, putting a Q&A explanation of
the ACCC action on its website, its m anagement
have not stepped up to the plate to explain why
they had not implemented an effective safety and
compliance regime.
Following the nightwear judgment, the
company said in a statement that when the issue
wa s brought to its attention in November 2010,
"Cotton On has worked diligently to address the
concerns raised by the ACCC in this case."
It said it took the safety of its products very
seriously, had further invested in its team to
monitor "the safety and compliance of our
They manifestly
failed to perform
this important
aspect of
their duties.
The potential
consequences
were most
serious. This is
a factor which
weighs in favour
of a significant
penalty.
Legacy of non-compliance
catches up with Cotton On
The hefty $1 million fine handed down to Cotton On Kids
Pty Ltd for selling highly flammable children's nightdresses and
pyjamas in Australia, labelled as "low fire danger" has largely
overshadowed a history of non-compliance by the retailer.
BY DENISE MCNA BB